On Wednesday, March 10th, the Federal Deposit Insurance Corporation (FDIC) closed down Silicon Valley Bank, in Santa Clara, California. In an effort to private insured depositors, the FDIC established a new local bank– Deposit Insurance National Bank of Santa Clara (DINB). However, Silicon Valley Bank’s pre-existing socioeconomic and market difficulties show that this closure could have a wider-reaching and negative impact on the banking industry across the country.

At the root of Silicon Valley Bank’s woes is the Federal Reserve’s decision to accelerate its campaign to fight inflation by raising interest rates. For banks, this means the value of their existing bond portfolios decreases with each rise in rate, and Silicon Valley Bank suffered due to the withdrawal of deposits, leading to the bank being forced to sell assets at a loss. This immediately translated to a $1.8 billion dollar